Sentletse Diakanyo
Sentletse Diakanyo

Cuban market reforms signal the death of communism

As the global economy slowly emerges from the rubble of the devastating 2008 financial crisis, developed and developing economies are beginning to review their macro-economic policies in a collective attempt to spur sustainable global economic growth and avert a similar crisis. The US has been largely to blame for initiating a crisis that caused global economies to collapse. It was a failure of unbridled capitalism and the malcontents of globalisation, which resulted in increased risk of correlation convergence (meaning the interconnectedness of global trade posed more systemic risk to the global economic system).

Diversification for those tasked with managing a portfolio of investments became less useful, as failure of one major economy had a domino effect on the rest. The lessons learned from the 2008 global economic collapse meant the G20 needed to cooperate more than before in order to ensure sustainable economic growth. The need to revisit individual macro-economic policies and economic models, in some instances, signals the seismic shifts in the collective mindset of world leaders and their approach to growth and prosperity.

The crisis may perhaps be blamed by some on the expansion of unbridled capitalism. It was largely a failure of strong regulatory oversight and the implementation of prudent macro-economic policies. Capitalism continues to be a system under which nations will continue to prosper. The fall of the Soviet Union and the Berlin Wall, as well the collapse of communism in Eastern Europe in 1989, meant that communism and socialism in their purity had no place in the world firmly embracing individualist pursuits of wealth and prosperity.

Cuba under Fidel Castro remained the last prominent “outpost” of communism. Countries such as China continue to define themselves as “communist nations” when in fact they fully embrace capitalism within an authoritarian political framework. China’s successes may be wrongly credited as successes of communism when it is the triumph of capitalism.

Raul Castro has made a startling admission that their economic model in Cuba has failed. Cuba has attempted to remain loyal to the communist ideals of the Cuban Revolution since the 1960s and it is now pursuing market reforms, which if successful, may afford ordinary Cubans their economic liberty. Castro has announced that the government will fire half a million public servants who are redundant, and promote opportunities for self-employment. Some say these market reforms may not yield significant positive results because it is not a wholesale transition to a free-market system. Nevertheless it is a step in the right direction after the collectivisation of the Cuban economy when Fidel Castro declared himself a Marxist-Leninist. Fidel had gone on a revolutionary offensive and confiscated small businesses, effectively subjecting the Cuban economy to protracted strangulation.

The US embargo imposed on Cuba in 1960, when Castro began to nationalise the properties of US citizens and corporations, also did not do the communist island much favour economically. The primary objective of this embargo was to isolate Cuba economically with the hope that it would lead to its total collapse and the democratisation of the island nation. The fall of the Soviet Union also exacerbated Cuba’s economic problems, as it lost its major trading partner. As early as 1996, the US Congress passed the Helms-Burton Act, which further restricted US citizens from doing business in or with Cuba. The US has been unrepentant in its quest to throttle Cuba’s economy. And it continues to enforce the embargo despite the UN passing another resolution early in 2010 condemning these economic sanctions.

The lesson that the US and its allies at the UN can learn from Cuba is that sanctions rarely work. They have failed for more than 50 years to transition Cuba towards democratic capitalism, and have failed to change the behaviour of other countries like Myanmar, Iran and North Korea. What sanctions did do was deepen the deprivation and misery of ordinary citizens. What has also become apparent is that sanctions are not generally imposed in the pursuit of equality, justice and freedom, but largely in the pursuit of economic self-interest.

George W Bush had previously opposed attempts by US Congress to impose trade sanctions against China because of their human-rights violations. China has jailed Nobel Peace Prize laureate Liu Xiaobo for campaigning for the democratisation of his native land. Despite the suppression of the civil liberties of the Chinese people, China remains the US’s key economic partner.

Cuba has been relying on handouts from Hugo Chavez of Venezuela. Whether Raul Castro’s market reforms will strain relations with Caracas is yet to be seen. Though Venezuela may have the resources to influence lesser fortunate Latin American countries, it should draw some instructive lessons from Cuba on the limits of blind totalitarianism within a global framework of economic progress. The ideological pursuit of nationalising private enterprise and denying citizens their economic and property rights is the best ingredient of a stillborn economy. Venezuela, which has pursued nationalisation under Chavez’s Bolivarian Revolution, does not have a sustainable economic model.

Cuba is now almost fiscally bankrupt and can no longer afford to carry millions of inefficient public servants. That the world economy is still emerging from the financial crisis leaves Cuba with limited options for its economy to stay afloat. Raul Castro was forced into a corner largely by economic circumstances and perhaps secondary by the realisation that Cuba’s economic model is not sustainable going into the future.

The impeding global economic realignment dictates on Cuba to revisit its economic model and make difficult choices between staying loyal to the communist ideals of the Cuban Revolution, which are disastrous, and the full adoption of the free-market system. It remains to be seen how Cuba will balance the transition to “managed” free-market system with its political regime in its quest to become a player in the transforming global economy. The conscious move towards strengthening economic relations between Cuba and China provides hope for the resuscitation of economic life on the communist island.

The political ideas of Karl Marx and Vladimir Lenin have effectively been relegated to the dustbin of history. Only pseudo-communists like Blade Nzimande would still imagine the transition of a particular state from democratic capitalism to an authoritarian and socialist system. Capitalism in whatever shape or form, managed, unbridled or otherwise, is what will define the course towards human prosperity and survival.

  • Kwame

    If this was meant to be a history lesson, it is a good one. I do agree that the Cuban economy is caught between a rock and a hard place. It is inevitable that they will follow in the steps of the last frontier’s of communism being Russia and China, by adopting their own version of capitalism.

    My concern is what will happen if Cuba decides to co-opt China (not to mention Venezuela) as its economic and trading partner, will the US allow such engagement at its door step? Or is a Cold War eminent with China?

  • SouthEaster

    “The lesson that the US and its allies at the UN can learn from Cuba is that sanctions rarely work.”

    So I didn’t need to go without those lovely Cape apples in 1980s British supermarkets after all…

  • Atlas Reader

    20 years ago Francis Fukuyama called it “the end of history” when the Berlin Wall fell and the USSR burst asunder. He was right, even if socialists denied it vigorously, still clinging forlornly to their promise from Marx that the final cataclysmic collapse of capitalism was an inevitable event and that a global socialist revolution would triumph.

  • MK-47

    …..Only pseudo-communists like Blade Nzimande…

    Priceless!

  • X Cepting

    If our current government has one thing in common it is the perverse habit of having to try out ideas that failed elsewhere. I sometimes think that all one has to do to see where we are going under the ANC is to go and look for failed ideas somewhere else in the world. Pity, we have so many brilliant ideas in Africa but will we use them? While all we talk about is our weakest links, the rest of the world is raving about our strongest:

    http://edition.cnn.com/2010/WORLD/africa/11/02/south.africa.dada.masilo/

    I must come to the conclusion that we do not want to trust our instincts and become the best. We just love failure.

  • Leruo

    Utter tribe and predictable rigmarole from a writer who seems to have swallowed the dominant neo-liberal orthordoxy without applying critical thought. Has it not yet dawned on you, in your quasi-analysis of the global economic crises, that unfettered capitalism and the pursuit of the limitless ‘sustainable economic growth’ of which you write has been the antithesis of ‘human prosperity and survial’? Not that I’m a communist or socialist, but I do think that the crises presents a perfect opportunity for pragmatic, ideology-free thiking going forward. This implies an understanding of the need to mitigate against the worst of the markets, and a ressurection of necessary ideas from your ‘dustbin of history’. That is, finding a useful role for the state, beyond that of a ‘night watchman’. Honestly, Diakanyo…akanya!

  • Peter Joffe

    The dream of a heavenly communist state where everyone relies on the state for their support is a great vote getter. As you rightly say Communism has been tried and tried but eventually falls apart. Nationalisation is, I think, a form communism in that it proposes a well run low cost enterprise where there is lots of money left over for the people and not taken by the ‘greedy’ capitalists. We all know that this is a myth. When Malema is president of South Africa you can expect us to change to communism and nationalisation and then, perhaps after 20 or 30 years of destruction and bad production he will discover that ‘something for nothing’ does not work. Unfortunately as time goes by Communist and Marxists states have to use state sponsored violence to suppress those who realise that if you don’t sow seeds, you don’t reap crops. If you take away the dreams and goals of motivated people, the whole country pays the price. The slogan for communism is ‘one for all, and all for one’, but the real slogan is ‘all for the rulers and none for the others’. “Whats yours is mine and what’s mine is also mine” is what happens as the proletariat live like kings and all others live in despair.

  • JW

    Death of communism? No way – not as long as we have idiots like Blade Nzimande and his followers. Years ago after the fall of the Berlin Wall and the breakup of the Soviet Union, it was announced that communism was dead. I’m afraid those that believe this are living in cloud-cuckooland…

    My question – if it did die – or due to die – then where is its grave???

  • Mike

    Will the ANC learn the lesson?

    Can we now stop wasting valuable time and resources in trying to implement this failed ideology in SA?

    Will the President and the ANC ever kill the talk of nationalisation?

    Can we put the useless communists: Blade, Cronin and Ebrahim Patel out to pasture?

    Will Dave Harris, Isabella, Bigman and the other ANC sycophants even bother to comment on this common sense article?

  • Jay

    While I agree with specifics in your article Sentletse; the fundamental problem with capitalism is its aim, which Marx understood firmly. Profit is king. Expenses i.e. labour costs must be kept a minimum. But cost of living continuously escalates through profit-taking and cyclical economic inflation. The capitalist business owner’s personal earnings are exposnentially higher than the worker. In times of systemic crisis, the business owners never suffer, as proved by the payouts to bank directors and bail-out costs since 2008. So workers become indebted beyond their means (by the unscrupulous consumer credit system) to be able to purchase the very goods they produce. The ultimate disaster of (perfect theory of) capitalism as when controlled by industrialists, not economists. The upper monied-class in most societies regard themselves as “nobility” above the worker, then crises can only repeat. Furthermore we will never develop an egalitarian society if the costs of education, healthcare, food resources, working conditions, living spaces, etc continue to be skewed in favour of the capitalist minority. No matter what name we give to the economic process, worker reaction will become more militant to survive. Lastly, the writer errs with a neoliberal slant. Communism is vastly different to socialism. The “collapse” of socialist societies is a result of the perpetually mercenary competitive free market system and illegal embargoes used for political and economic stragulation. The free market cannot sustain the lifeblood of a huge world population. Captalism should have been relegated to the dustbin decades ago.

  • Shallow HAL

    The notion that it was ‘unbridled’ capitalism that was the cause of the finacial meltdown in 2008, while being a popular opinion, is an incorrect one.

    The financial meltdown can be accounted to 2 major causes, the ‘spark’ of the subprime mortage crisis, and the so called SIVs that ‘masked’ risky investments spread the contagion.
    It is government intervention into the loan market through Freddie Mac and Fredie Mae that encouraged loans to the uncreditworthy, and it is the unspoken but generally accepted guarantee of the Federal Reserve to banks in crisis, that encourages irresponsible and risky financial decisions.
    It is evident that the US government through its intervetion in the economy had a major hand in the financial crisis, but it is always easy to blame the greedy capitalist when it comes to election time.
    The official version of the 2008 events has become a real bromide and is just another excuse for heavy handed government and expansion of state powers.

  • ae

    If communism is dead, why do we still have the SACP as part of the tripartite alliance? Someone please forward this article to Lethuli House.

  • Graham Johnson

    I think that the ANC policy is to embrace anything that is opposite to what Europeans or Americans (i.e. whites/pinks) do. It shows every time they open their mouths and includes their attitudes to ethics and morality. Sad, really.

  • Tsholofelo

    @Graham Johnson…..yes but we are not in Europe or America??

  • Barry Kayton

    The notion that the economic crisis is the result of “unbridled capitalism” and “largely a failure of strong regulatory oversight and the implementation of prudent macro-economic policies” is repeated by politicians and many mainstream (Keynesian) economists. These are the same people who assured us that the world economy was in great shape and who dismissed the warnings from Austrian School economists years before the crash.

    Compare the mainstream message with an alternative explanation. Take a look at “Economic Recessions, Banking Reform, and the Future of Capitalism” a lecture by Jesus Huerta de Soto at the London School of Economics (http://mises.org/daily/4817).

    Cautionary note: if you’re looking for glib slogans don’t bother reading this. But if you really want to understand the nature of this crisis and all the others that happened over the last century, this will get you started. In a nutshell: financial bubbles are caused by fractional reserve bank (a socialised money supply). The remedy is 100 percent reserve banking, which is the only system compatible with the general principles of the law of property rights, which of course is at the heart of capitalism.

    Capitalism is great at matching supply and demand; socialism sucks at this. But the so-called free market we often talk about is undermined by central planning of the money supply. Central planning fails in agriculture and consumer goods. Is it any wonder it fails when used to plan the money supply?

  • tzMe

    Will I now be able to buy one of the gas guzzlers that roam the streets of of Havana? Theres a possibility, nay , a probability that if i could as a classic collectors item could be more valuable than Blades 750i … God forbid!

    On amore serious note though, a question often asked and never really answered …. how about their “political prisoners”? .. Do they exist? If so, how many are there and would their status now change? Any chance they’ll be released?

    And where’s Fidel? Is he aware of this change? Is he party to this?